Merchant Banking

Topics: Initial public offering, Stock exchange, Stock Pages: 53 (18030 words) Published: October 18, 2010
1.Q: Explain the functions of Merchant Banking.
Merchant banking is a service oriented industry. Merchant banks all over the world carry out the same set of services. Merchant banks in India carry out the following functions and services specifically. 1.Corporate Counseling

2.Project counseling
3.Pre-investment Studies
4.Capital restructuring
5.Credit Syndication
6.Issue Management and underwriting
7.Portfolio Management
8.Working Capital Finance
9.Acceptance Credit and Bill discounting
10.Mergers, Amalgamations and Takeovers
11.Venture Capital
12.Lease Financing
13.Foreign Currency Finance
14.Fixed Deposit Broking
15.Mutual funds
16.Relief to Sick Industries
17.Project Appraisal
Each of these functions is detailed briefly below.
Corporate Counseling
The set of activities that is undertaken to ensure the efficient running of a corporate enterprise is known as corporate counseling. It may include the rejuvenating of old line companies and ailing units, and guiding the existing units in identifying the areas or activities for growth and diversification. The merchant banker guides the clients on various aspects like Locational factors, organizational size, operational scale, choice of product, market survey, cost analysis, cost reduction, allocation of resources, investment decision, capital management and expenditure contro, pricing, etc.  

Following are the activities which form part of corporate counseling: 1.Providing guidance in areas of diversification based on the Government’s economic and licensing policies. 2.Undertaking appraisal of product lines, analyzing their growth and profitability and forecasting future trends. 3.Rejuvenating old-line companies and ailing sick and units by appraising their technology and process assessing their requirements and restructuring their capital based. 4.Commissioning of diagnostic studies.

5.Assessment of the revival prospects and planning for rehabilitation through modernization and diversification and revamping of the financial and organizational structure. 6.Arranging for the approval of the financial institutions/banks for schemes of rehabilitation involves financial relief, etc. 7.Providing assistance in getting soft loans from financial institutions for capital expenditure, and the requisite credit facilities from the bank. 8.Monitoring of rehabilitation schemes.

9.Exploring possibilities for takeover of sick units and providing assistance in making consequential arrangements and negotiations with financial institutions/banks and other interests/authorities involved. Project counseling

Project counseling relates to project counseling and is part of corporate counseling. The study and analysis of the project viability and the steps required for its effective and efficient implementation are broadly the subject matter of project counseling. Following are the activities forming part of the Project counseling: 1.Undertaking the general review of the project ideas/project profile. 2.Providing advice on procedural aspects of project implementation. 3.Conducting review of technical feasibility of the project on the basis of the report prepared by own exerts or by outside consultants. 4.Assisting in the selection of a Technical consultancy Organization (TCO) for preparing project reports and market surveys, or review of the project report or market survey reports prepared by TCO. 5.Assisting in the preparation of project report from a financial angle, and advising and acting on various procedural steps including obtaining government consents for implementation of the project. 6.Assisting in obtaining approvals/licenses/permissions/grants, etc from government agencies in the form of letter of intent, industrial license, DGTD registration, and government approval for foreign collaboration. 7.Providing guidance to Indian entrepreneurs for making investment in Indian project in India and in Indian joint ventures...
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